Commodore financial history, 1978-1994

Commodore’s rise and fall are legendary, at least to people like me who grew up using their computers. Putting numbers to that rise and fall was more difficult. I dug up the Commodore financial history from 1978-1994 to help quantify that spectacular rise and fall.

It’s noteworthy that I had a hard time finding some of this information. I don’t think Irving Gould, Commodore’s chairman and largest shareholder, wanted people to know this stuff.

Commodore revenue and profit, 1978-1994
Commodore made a lot of money from 1978 to 1994 but sure didn’t keep much of it. It peaked in 1984, plateaued for a few years, then fell off the cliff.

Try as I might, I couldn’t find financial information for 1977. Commodore certainly accepted orders for the PET 2001 in the 1977 fiscal year, though it was well into the 1978 fiscal year when Commodore got around to making and shipping them. But data from 1978 to 1994 is better than piecemeal data. The data is in graphical form in the chart to the right, and in the table below.

Year Revenue Profit Margin
1978 $50,100,000.00 $3,400,000.00 0.067864
1979 $71,100,000.00 $6,500,000.00 0.091421
1980 $125,000,000.00 $16,200,000.00 0.1296
1981 $186,000,000.00 $24,847,000.00 0.133586
1982 $304,000,000.00 $40,600,000.00 0.133553
1983 $681,100,000.00 $91,700,000.00 0.134635
1984 $1,270,000,000.00 $143,000,000.00 0.112598
1985 $883,100,000.00 -$113,000,000.00 -0.12796
1986 $889,000,000.00 -$127,000,000.00 -0.14286
1987 $806,000,000.00 $28,600,000.00 0.035484
1988 $871,100,000.00 $48,200,000.00 0.055332
1989 $939,000,000.00 $50,100,000.00 0.053355
1990 $887,300,000.00 $1,500,000.00 0.001691
1991 $1,040,000,000.00 $48,200,000.00 0.046346
1992 $911,000,000.00 $27,600,000.00 0.030296
1993 $590,800,000.00 -$356,500,000.00 -0.60342
1994 $70,100,000.00 -$17,500,000.00 -0.24964

Some of these numbers are approximate. I found conflicting information sometimes, but the numbers were always within a few hundred thousand dollars of each other.

Look at the profit margins. Commodore always had razor-thin margins. Even in their best years, 1981-1984, at the height of the VIC-20 and C-64’s success, they lived with 11-13 percent profit margins. They sold billions of dollars worth of computers but only had tens of millions of dollars to show for it. Compaq sold a lot fewer computers in 1983-86 but set records doing it.

Then, in 1984, after Jack Tramiel left, the margins got much worse. Several reasons for Tramiel’s departure came out over the years:

  • Objections to Irving Gould using Commodore money as his own
  • He wanted to issue more stock to pay down debt
  • A desire for his sons to have leadership roles in the company

Tramiel’s sons dismiss #3 as a Gould-produced rumor. One of them didn’t even work for Commodore at the time.

When the Commodore 64 cost $595 at retail, there were rumors that it cost $135 to make the machines. We know that Commodore’s engineers made less than $60,000 a year. So it doesn’t make a lot of sense that Commodore was selling hundreds of thousands of machines at 440% markup and only getting a 13 percent return on its investment. The 64’s price dropped over time, and its margin dropped slightly, but when it was selling for $149, it cost about $35 to make. That’s still a 425% markup, and the volume was higher at that price.

So where did the money go?

We know Commodore had a lot of debt. Interest rates in the 1980s were rather high, so that likely cut into the profits. Tramiel and Gould probably didn’t see eye to eye on this because some of Commodore’s debt was owed to other companies that Gould controlled.

We know that Gould never spent more than three days in a single country in a given week to avoid taxes, and he used a plane that Commodore either owned or leased to travel between Canada, the United States, and the Bahamas. For a time, Commodore leased the plane from another Gould-controlled company at about the same rate as a charter plane would cost. But the charter plane would have included fuel.

Commodore lost hundreds of millions of dollars in 1985 and 1986. Part of that problem may have been hangover from the ill-fated TED machines. Another part was that the 64 didn’t have the price point and sales volume to carry the company on its own. The 128 more than met its sales goals. The biggest problem was the Amiga. It was late in 1985 and sold poorly in 1986.

Doing the math, it seems to me that with Commodore’s margins, it needed to be a billion-dollar company in 1985 and 1986 to be profitable, and it fell short. If they’d hit a billion dollars in sales, it stood to reason they would have made 100 million in profit like they did in 1984. They missed by 200 million, so they lost 100 million those years.

Commodore’s presidents during that time tried to cut costs. Gould disagreed, wanting them to increase sales. Ultimately he fired them. But looking at the math, it’s hard to argue with the approach. It’s easier to cut costs than it is to increase sales. And most of the people Gould hired knew more about money than they knew about computers.

Then again, Tramiel wanted to cut costs too. Gould wanted yes-men and kept getting guys who found the same things Tramiel did.

It seems like the same 1985-86 logic applies to 1990. Revenue dropped by about $52 million from the previous year and profits dropped by about $48.5 million. The next year, in 1991, they hit a billion dollars and they made about $50 million. That’s far too little considering the price of Amigas at the time. But by then, Gould was paying himself and his allies a lot more than their peers at larger computer companies made.

1992 was the last good year. That was the year the Amiga 1200 and 4000 finally came out. Commodore sold a million Amigas that year, and had a profit of $27 million to show for it. The profit was disappointing. Perhaps it shouldn’t have been, because Commodore never saw another one.

This shouldn’t be surprising. PC clones were catching up with the Amiga in capability. And every consumer electronics store and warehouse club in the country sold cheap PCs from Packard Bell. These PCs were low quality, but they cost hundreds less than an Amiga and Commodore’s dealer network couldn’t match the convenience. Packard Bell beat Commodore at the game it invented in the 1980s.

In 1993, Commodore hit negative equity. It didn’t have to work out that way. There was still demand for the Amiga 1200 and 4000. And Commodore reworked the Amiga 1200 into a nifty game console called the CD32. If Commodore sold 400,000 CD32s, it would stay afloat.

But to hear former Commodore employees talk, finding the money just to build those 400,000 units was going to be a problem. Then legal problems kept them from introducing it in the United States. They sold 100,000 units in Europe, where it outsold Sega’s Mega CD console. But it was too little, too late. There was a time when Commodore could easily sell 100,000 units a month, but 1993 wasn’t it.

Commodore limped into 1994 on borrowed money and went out of business in April. It was an inglorious end to the company that made color graphics and sound standard features on computers, and introduced consumers to pre-emptive multitasking, stereo sound, and video editing.

2 thoughts on “Commodore financial history, 1978-1994”

  1. This is a fantastic write-up. I would love to give it a wider audience some day.

    Congrats on an excellent work of journalism.

    1. Thank you, Steven. Coming from you that’s a tremendous compliment.

      Steven is the co-creator of the Long Term Quality Index, which I’ve written about before. It’s the result of gathering data from more than a million used cars. If you’re in the market for a car, see what Steven Lang has to say about it first.

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